After years of debate, the NSW Government has recently announced changes to stamp duty that applies to residential property purchases. We’ve outlined the proposed changes that will come into effect in July 2019 and detailed what they mean for the upper north shore property market.
What is the proposed stamp duty reform in NSW?
Stamp duty was introduced in NSW in 1986, but has remained untouched ever since. The original system didn’t account for the Consumer Price Index (CPI), so as property prices increased, buyers were also paying increased rates of stamp duty. These rates were based on property prices from 1986, when Sydney’s median price was $100,000, instead of its current position around the $1 million mark. These effects on housing affordability have become clearer in recent years as property prices hit their peak.
The proposed reform will link stamp duty to CPI, so the seven stamp duty price brackets will rise in line with inflation. The State Government says this change will save the average buyer approximately $500 in the short-term, but that these savings will continue to increase over time.
This tax break is the second stamp duty change in as many years, after exemptions and discounts for first homebuyers were introduced in 2017. Under that scheme, first-time buyers are exempt from stamp duty on properties valued under $650,000 and receive discounts on properties under $800,000.
What’s the effect of stamp duty changes on the upper north shore?
The property market in Ku-ring-gai has truly boomed in recent years, experiencing incredible growth across all suburbs. This has been wonderful for many vendors, but it has also added higher stamp duty costs for buyers. Using Wahroonga as an example, REA Group data shows that the median house price in 2009 was $940,000, with stamp duty of $37,790. Nine years later, in 2017, the median price was up to $2.15 million and stamp duty had also risen to $100,990.
Even beyond pure affordability, stamp duty has long been an issue in the upper north shore, as it’s contributed to a tightly held market. High stamp duty costs have made it difficult for homeowners to downsize, so many of the area’s older residents have been reluctant to sell a large homes in favour of something smaller.
By making it easier for homeowners to move on to their next home, the stamp duty changes will also free up a lot of the wonderful housing on the upper north shore. There will be more opportunities to buy family homes and greater opportunity for first home buyers to enter the market with lower costs.